Micro, Small and Medium Enterprises (or MSME), is a small to medium scale enterprise governed by the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. MSMEs play a very crucial role in the Indian economy and also contributes to a significant employment provider in India. Quite often MSMEs are termed as the growth drivers of the Indian economy.
In this article, we will discuss the various types of MSMEs and how to enroll in your business as an MSME.
CATEGORIES OF MSME
The following is the criteria for classification into Micro, Small and Medium Enterprise:
PROCEDURE FOR REGISTRATION
All Micro & Small Enterprises which are registered with Director of Industries (DI)/District Industries Centre (DIC) as manufacturing/service enterprises or having Acknowledgement of Entrepreneurs Memorandum (EM Part-II) are eligible for registration with NSIC under it’s Single Point Registration Scheme (SPRS).
Micro and Small Enterprises who have already commenced their commercial production but not completed one year of existence. The Provisional Registration Certificate can be issued to such Micro and Small Enterprises under Single Point Registration scheme with monetary limit, minimum amount of money to be invested, of Rs. 5 Lakh which shall be valid for the period of one year only from the date of issue after levying the registration fee and obtaining the requisite documents.
How to apply for MSME registration?
Micro and Small enterprises could be applied through online application that is provided by the prescribed state website of the respective state, by submitting the application form in duplicate which is to be submitted the concerned Zonal/Branch Office of NSIC located nearest to the unit.
Step 1: Provisional Small Scale Industry (SSI) Registration
To obtain SSI registration you must apply for a provisional SSI registration certificate first. This certificate is given when the unit is in the pre-operative stage and helps SSI unit to obtain term loans and working capital. This license is given for five years.
One could apply for this certificate online through the state website or by applying it in the concerned zonal department.
Important Documents for Provisional SSI registration:
- Three passport size photographs of proprietors/partners/directors, as in the case may be.
- Photocopy of the partnership deed in case of a partnership unit. It is not necessary that the partnership should be registered under the Partnership Act.
- Copy of the Memorandum and Articles of Association in case of Private Company along with a certificate of incorporation. Copy of resolution of the company authorizing one of the Directors of the company to sign application form and also appear for the interview.
- Proof of legal possession i.e. rent receipt, NOC from the landlord with proof of ownership, the power load authorized by the connection holder to the applicant.
- Provisional Registration would be allowed in approved Industrial areas only after the Unit has obtained consent to establish from Delhi Pollution Control Committee.
- Some of the documents may differ because each state has different requirements for documents. The above-given documents are required documents that have to be submitted at the time of provisional SSI registration.
Benefits of Provisional SSI registration
- Material for construction of factory building: The material which is needed for construction of the factory or building would be available to the factory at subsidized rates from the government.
- Apply for Municipal Corporation License & power connection. With the provisional registration, the company would be able to get all the clearances from concerned authorities.
Step 2: Start the Business
The next step towards having a permanent license is to start the business with SSI certificate. The owner should start the production in the factory so that a permanent license could be given.
Step 3: Apply for Permanent SSI registration
After you have started the business you should apply for permanent SSI registration. This could be done by applying online through a state website or through the Zonal office or district office of the department.
Requirements for applying PRC (Permanent Registration Certificate)
- You may apply for the PRC without an industrial license in case your unit is listed in Schedule-III of the Industrial Licensing Exemption Notification. Other units must be first acquiring an industrial license.
- The unit should have obtained all clearances from the pollution control board, drug control board, etc.
- The unit should not violate any location restriction.
- The original value of plant including machinery should be within prescribed limits for which you are applying.
- The unit should not be a subsidiary, owned or controlled by another industrial undertaking.
Documents that are to be submitted for applying in.
- Proof of ownership of premises i.e. allotment letter/possession letter/lease, Deed/property tax receipt. If the unit has a municipal corporation license in its own name or in the name of its proprietor or one of the Partner/Directors as the case may be, then no other proof of legal possession is required.
- In case premises are arranged on a rental basis, the unit should submit proof of Legal possession i.e. a rent receipt and/or NOC from the landlord supported by the proof of land lord’s ownership. For this purpose rent receipt/rent agreement with GPA (General Power of Attorney) is also accepted provided the GPA is appointed by the owner/lessee through a Regd. deed.
- One photocopy of the sale bill of each end product applied for.
- One photocopy of the purchase bill of each raw material.
- Copy of partnership deed in case of partnership unit (need not be registered.)
- Copy of Memorandum Articles of Association with certificate of incorporation in case of a private limited company (in case of any change of Directors subsequently, copy of resolution and intimation in form DIR-12 )along with a copy of the resolution authorizing one of the directors to sign the application for a grant to permanent SSI registration.
- Copy of the industrial license from Govt. of India in case of end products requires such license under Industrial Development and Regulation Act.1951.
- An affidavit on Rs.10/- Non-judicial Stamp Paper duly attested by Notary Public affixed with proper notarial Stamp giving the status of the unit, machinery installed, power requirement etc. as per the prescribed format
- Purchase bill of machinery installed.
- Photocopy of valid consent letter from the pollution control committee of that state.
Benefits for having a permanent MSME or SSI registration
- Tax Benefits: Depending on your business, you may enjoy the Excise Exemption Scheme as well as exemption from certain Direct Taxes in the initial years of your business.
- Availability of raw material depending on existing policy: Raw material for production would be given by the government in the initial years at subsidized rates.
- Benefits from Banks: All banks and other financial institutions recognize MSMEs and have created special schemes for them. This usually includes priority sector lending, which means that the likelihood of your business being sanctioned a loan is high and lower bank interest rates. There may also be preferential treatment in case of a delay in repayment.
- Benefits from State Governments: Most states offer those who’ve registered under the MSMED Act subsidies on power, taxes and entry to state-run industrial estates. In particular, there is a sales tax exemption in most states and purchase preference on goods.
- Special consideration on participation in international trade fairs.
- They can avail of the bar code Registration Scheme.
- Subsidy on Credit Rating.
- Counter Guarantee from GOI.
- Protection against delay of payment– The Ministry of Micro, Small and Medium Enterprises gives protection to MSME Registered Business against delay in payments from Buyers and right of interest on delayed payment through conciliation and arbitration and settlement of dispute be done in minimum time. The buyer needs to pay before the date agreed on between the buyer and MSME. In case there is no payment date on the agreement, then the buyer is required to make payment within 15 days of acceptance of goods or services. Further, in any case, a payment due to a micro or small enterprise cannot exceed 45 days from the day of acceptance or the day of deemed acceptance. In case of failure by the buyer to make payment on time, the buyer is required to pay compound interest with monthly interest rests to the supplier on that amount from the agreed date of payment or 15 days of acceptance of goods or service. The penal interest chargeable for delayed payment to an MSME enterprise is three times of the bank rate notified by the Reserve Bank of India.
- The Ministry of Micro, Small and Medium Enterprises gives following benefits to an enterprise that have MSME Registration while making an application for Government Tenders:
1. Issue of tender sets free of cost
2. Exemption from payment of Earnest Money
3. Waiver of Security Deposit up to the Monetary Limit for which at the unit is registered.
- Enterprises that have MSME Registration have a preference for procuring government tenders. Special treatment is given to MSME Registered organization while making application for government tenders.
- Enterprises that have MSME Registration can avail 15% weightage in price Preference as mentioned
- Enterprises that have MSME Registration can avail the benefit of a 1% exemption on the interest rate on OD as mentioned in the scheme.
- Enterprises that have MSME Registration Certificate can avail 50% subsidy for patent registration by making an application to the respective authority
Time taken for SSI or MSME registration ranges between 5 to 20 days depending on the state in which the industry is located in.